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Scrutiny
  
246 PSUs; 33 Yet to Commence Ops!
A Number of PSUs Look Desperately for a light at the Tunnel End, Or even a Moving Train...
25/11/2010

Navratnas have ensured in the recent past that the world looks at Indian public sector undertakings (PSUs) in a different light. But then, this is just like most aspects in India, where the large numbers at the bottom of the PSU pyramid are ignored for the few stars at the top, who bring up the averages as well as the GDP contributions for the nation. But such an ignorance of the bottom is suicidal at best.

Our great nation has around 246 PSUs in all. Talking in numbers, the net profitability ratio of PSUs has increased from 8% to 14.5% since the last one decade on an average. But then, given the mammoth number of PSUs, this seems quite miniscule – especially when the economy is experiencing a steep northward trend. Of the 246 PSUs, 33 are yet to commence operations. Out of the 213 functioning PSUs remaining, more than 50 PSUs are in losses. Their total contribution to the GDP of the country is merely 6.5%. A recent CAG Audit 2008-09 report points out that 15 PSUs of Gujarat made a loss of Rs.25.4 billion in the last three years. On a yoy basis, the loss has increased alarmingly from Rs.4.41 billion in 2006-07 to Rs.19.63 billion in 2008-09. This is just not confined to Gujarat.

Another CAG report found that Public Sector Undertakings (PSUs) in Andhra Pradesh had accumulated losses of Rs.23.52 billion for 2008-09 and further concluded that PSUs could have controlled losses of up to Rs.12.38 billion with better management. The latest CAG report on Jharkhand reveals that 10 public sector undertakings in the state posted an accumulated loss of Rs.18 billion and made “futile investments of Rs.743 million” for 2008-09.

On an average, more than Rs.20 billion per annum is spent on sick and loss-making public sector undertakings, especially in the last eight years. For the uninitiated, a company is termed as sick “if at the end of any financial year it has accumulated losses equal to or exceeding its net worth.” According to the Finance Ministry, losses on “sick PSUs” alone were more than Rs.146.5 billion in the last eight years. However, this amount seems meager if the total amount invested or spent on loss making (including sick PSUs) is calculated. The restructuring packages of all PSUs stands at whopping Rs.170 billion, in last eight years. The same report suggests that on an average, over Rs.76,000 per employee has gone to the workforce in sick public sector undertakings.

Most of the 246 PSUs don’t carry a high brand equity, as more than half of them are either loss making or confined within their operations. A recent media report reveals that a total of Rs.284 billion worth of fixed assets are trapped in loss-making PSUs. Add to this another Rs.78.24 billion, which is wasted on 3.8 lakh workers as salaries and wages. Thus total cash flow to these unproductive PSUs touches a figure of Rs.450 billion comfortably! The accumulated losses by these PSUs have crossed the Rs.650 billion mark.

All in all, besides a chosen few, most Indian PSUs are in a state of utter distress. They are neither minting money for the economy nor providing any meaningful contribution to society. Privatising management is not an option, as our government – whenever it gets the chance – sadly privatises profit making PSUs than loss making ones; and even expends a lot of energy in planning stake sales of top performing PSUs. It is far more important to look seriously towards unlocking the wealth that’s stuck in the hopelessly under-performing ones.

By:- Sray Agarwal
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